Political Ruminations

Morning Quote: Sanford Weill Calls for Break-Up of Big Banks

Sanford Weill, former Citigroup CEO and chairman, stunned the financial community yesterday when he called for the break-up of the big banks, the banks that are still “too big to fail”, emphasis mine:

“ What I think we should probably do is go and split up investment banking from banking and have banks be deposit takers, have banks make commercial and real estate loans. And have banks do something that will not risk tax payer dollars. And that is not going to be something that will not be too big to fail. If banks want to hedge what they are doing in their investments, let them do it in a way that is marked to market so that they are never going to be hit. ”

Weill went on to be even more explicit, emphasis mine:

“ I’m suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk, the leverage of the banks will be something reasonable, and the investment banks can do trading, they’re not subject to a Volcker Rule, they can make some mistakes, but they’ll have everything that clears with each other every single night so they can be market-to-market. ”

According to The Hill, lawmakers in Washington took the opportunity to talk about additional financial regulation, which would be a very good thing. But let’s get real here, nothing, absolutely nothing  will happen until and unless we elect a Democratic House, Senate, and President in November.

Republicans Love the Banksters

Not only would it essentially repeal President Obama’s Wall Street financial reform law, Dodd-Frank, but it would encourage more of the too-big-to-fail entities we bailed out in 2008. Ezra Klein via Bob Cesca:

On financial regulation, Paul Ryan’s 2013 budget basically cuts-and-pastes its recommendations from last year: it wants to repeal parts of Dodd-Frank that give new power to federal regulators to break up big banks, arguing that the regulations actually make bailouts more likely, not less so. Ryan isn’t proposing an alternative, however, so his plan to repeal the government’s new “resolution authority” would bring us back to the pre-Dodd Frank era — which was also, of course, the era in which bank bailouts proved necessary.

Under Wall Street reform, financial institutions that are deemed “systemically significant” are subject to a host of new regulations, including a new rule that requires them to submit “living wills” that explain what would happen if the firm went belly up. They’re required to submit such plans to the Federal Deposit Insurance Corporation, which has new authority to help liquidate troubled firms so as to avoid systemic catastrophe and prompt taxpayer bailouts.

Republicans (with the help of Bill Clinton who supported the repeal of Glass-Steagall) caused the financial crisis of 2008, and the repeal of Glass-Steagall allowed banks to become the behemoths that we now refer to as “to big to fail”.

Apparently, once wasn’t enough for the GOP.

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Morning Quote: Michele Bachmann on the Financial Reform Bill

Flashback to last May, when the financial reform bill was wending its way through Congress, Rep. Michele Bachmann (R-MN), who can always be counted on for hyperbole and assorted fabrications,  likened the financial reform bill to the policies of the fascist government in Italy during Mussolini's reign:

Let's remember really what this is. This has a lot in common with Italy in the 1930s and the way Italy dealt with economics. It still continues private ownership of business but government is in control.

So government control of the private business, while it's private ownership, that's still at the end of the day the federal government virtually having a say over private business. We lose freedoms; we lose economic competitiveness.

And don’t forget, Italy is in tough shape financially, and that’s not what we want for the United States.

SEC Creates HUGE Fund to Pay Future Whistleblowers

This action by the SEC was not taken out of any real desire to police Wall Street in a more responsible way, but rather is a result of the requirements of the financial reform bill passed in July almost solely by Democrats, and is yet another in the list of formidable accomplishments of the Obama administration.

WASHINGTON — The Securities and Exchange Commission says it has set aside about $450 million for payments to outside whistleblowers whose information results in successful cases and penalties collected from companies or individuals.

The SEC set up the program in accordance with the financial overhaul law enacted in July. It follows intense public criticism of the agency for the breakdown that allowed Bernard Madoff's multibillion-dollar fraud to go undetected for 16 years, despite numerous red flags raised by whistleblowers.

A report issued Friday by the SEC shows it has put $451.9 million into a new fund to pay whistleblowers, which must have a minimum $300 million.

Only 3 Republicans voted to pass this bill.

Three Republicans crossed the aisle to give Democrats the necessary 60 votes to end debate and to pass the bill. Massachusetts Sen. Scott Brown voted for financial reform after a multi-billion dollar bank tax was removed. Maine Republican Sens. Olympia Snowe and Susan Collins also voted for the bill.

Hey, can't tax the banks. They'll take away their support, right, Scott Brown?!

Basel III Global Regulators Agree to New Bank Capital Rules

Ezra Klein on the Basel III agreement, with a plug for Tim Geithner:

But their agreement is, arguably, more consequential then the financial regulation bill we just passed: Where the bill itself left capital requirements -- the amount of cash and other safe assets banks have to hold to protect themselves (and us) from disasters -- blank, the international agreement fills them in. And they look, well, pretty good. That's a huge coup for Timothy Geithner, as Europe wanted a much weaker agreement.

Reuters:

New bank capital rules agreed by global regulators brought relief to the world's banks on Monday although one of the architects said the sector would eventually have to raise hundreds of billions of euros.

The new requirements, known as Basel III, will demand banks hold top-quality capital totaling 7 percent of their risk-bearing assets, but a long lead-in time eased fears that lenders will have to rush to raise capital.

Felix Salmon on how the Basel III agreement works [very wonky].

Lobbyists Heart John Boehner as GOP Plots House Takeover

Yesterday, The New York Times did a piece on the logistics of the care and feeding of House Minority Leader, John Boehner.

You know, that Republican, that guy that refuses to cast a yes vote to pay for health care for 9-11 heroes because of his fake deficit hawkishness, but demands that we extend the Bush tax cuts for the wealthy. The same guy who would become the Speaker of the House, third in line for the presidency, should Republicans retake the House in November. That guy moron.

WASHINGTON — House Democrats were preparing late last year for the first floor vote on the financial regulatory overhaul when Representative John A. Boehner of Ohio and other Republican leaders summoned more than 100 industry lobbyists and conservative political activists to Capitol Hill for a private strategy session.

The bill’s passage in the House already seemed inevitable. But Mr. Boehner and his deputies told the Wall Street lobbyists and trade association leaders that by teaming up, they could still perhaps block its final passage or at least water it down.

“We need you to get out there and speak up against this,” Mr. Boehner said that December afternoon, according to three people familiar with his remarks, while also warning against cutting side deals with Democrats.

That sort of alliance — they won a few skirmishes, though they lost the war on the regulatory bill — is business as usual for Mr. Boehner, the House minority leader and would-be speaker if Republicans win the House in November. He maintains especially tight ties with a circle of lobbyists and former aides representing some of the nation’s biggest businesses, including Goldman Sachs, Google, Citigroup, R. J. Reynolds, MillerCoors and UPS.

They have contributed hundreds of thousands of dollars to his campaigns, provided him with rides on their corporate jets, socialized with him at luxury golf resorts and waterfront bashes and are now leading fund-raising efforts for his Boehner for Speaker campaign, which is soliciting checks of up to $37,800 each, the maximum allowed.

Meanwhile, the GOP is already secretly plotting their moves for  "when" Boehner becomes the Speaker.

House Republicans have held a series of private discussions to plot their first moves if they win the majority in November — with plans to use spending bills and subpoenas to rein in President Barack Obama and satiate their own ravenous base.

Republicans recognize they won’t be able to do any broad governing even if they take back the House; they’d hold just one chamber of Congress, or at most one branch of government, if they also win the Senate. So officials familiar with the early discussions say they’ve centered on undoing key parts of the Obama agenda and repositioning Republicans as the party of fiscal responsibility heading into 2012 — a mantle the GOP surrendered during the big-spending George W. Bush years.

The plans presently under discussion include defunding some parts of the new health care law and delaying implementation of others, withholding some of the unspent stimulus funds and using the oversight power of Republican-led committees to investigate the Obama administration.

“The goal, obviously, would be to make it a one-term presidency,” said a GOP lobbyist briefed on the talks.

I will be at the polls in November to vote. We can’t afford to let Republicans govern. Hell no.

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RELATED POSTS:

~ John Boehner is a Moron Whose Economic Plan Would Devastate the U.S. Economy

~ John Boehner is an Idiot

~ John Boehner wants to repeal the financial reform bill

VIDEO: What Wall Street Reform & the New Consumer Protections Act Means for You

A brief, animated video put out by the White House. The financial reform bill was signed by President Obama today, and includes the creation of a new, federal Consumer Protection Agency. Will this tame the big banks? It'll surely help!

Talking Points: A President who gets things done

This needs to be repeated, over and over, between now and November, as part of our mantra. Stuart Shapiro:

Earlier this week, Congress passed financial reform which will be signed by President Obama in the days ahead.  As Sheryl Gay Stolberg notes in the New York Times, this marks the third economy-wide statute that has been passed in a year and a half under Obama.

The financial regulatory bill is the final piece of a legislative hat trick that also included the stimulus bill and the landmark new health care law. Over the last 18 months, Mr. Obama and the Democratic Congress have made considerable inroads in passing what could be the most ambitious agenda in decades.

In a mere one-and-a-half years, Obama has pushed through Congress bills more far-reaching than any President since Nixon.  If he stopped now, his policy legacy would be the largest overall since Reagan and the largest domestically since Nixon or Johnson.

Hammer them with it.

John Boehner wants to repeal the financial reform bill

At a press conference today, House Minority leader, John Boehner (R-Ohio) said that the financial reform bill should be repealed, that its ill-conceived, and that it penalizes Main Street bankers unnecessarily.

“I think it ought to be repealed. I think the financial reform bill is ill-conceived. I think it's going to make credit harder for the American people to get -- clearly harder for businesses to get. And the fact that it's going to punish every banker in America for the sins of a few on Wall Street, I think is unwise. On top of that, I think that it institutionalizes "Too Big To Fail" and gives far too much authority to federal bureaucrats to bail out any company in America they decide ought be bailed out.”

Seriously? Did he just forget about the fact that the deregulation of the banking industry  contributed much to this horrific recession? He sure as hell didn't forget. That is the aim, after all. To keep the Wall Street criminals lining his pockets on a regular basis. The hell with the people who elected him and his fellow obstructionists to progress.

Via TPM

Yeah, they gutted financial reform, but the Kanjorski Amendment survives

While Wall Street did a bang-up job in the dismantling of many of the meaningful reforms in the financial reform bill, they missed something big and important. The Kanjorski Amendment, which for the first time ever, forces regulators to monitor and determine whether an individual bank poses a grave systemic risk to the system. And, it gives them the power to take down the big banks if they are determined to pose a grave risk to the system. Simon Johnson, via Bloomberg:

Scouring all 2,400 or so pages of the bill, which has now passed the House and awaits final passage in the Senate, it is hard to find anything that will substantially change how Wall Street operates.

And yet there is one item that is more than a surprise -- in fact, its presence in the final bill is quite stunning.

This is what is known as the Kanjorski Amendment, after Congressman Paul Kanjorski, chairman of the House Subcommittee on Capital Markets, part of the House Financial Services Committee.

Who are the Kanjorski 10? This is the systemic risk council, which includes the treasury secretary (as chairman), the chairman of the Federal Reserve’s Board of Governors, the director of the new consumer protection agency, the head of Federal Housing Finance Agency, the chair of the National Credit Union Administration board, an individual who will represent insurance regulators and representatives from the each of the four standard federal regulatory agencies.

If two thirds of the council’s members agree (i.e., 7 out of 10), then a financial company can be subject to a variety of restrictions, up to and including the requirement that it divest itself of particular activities or more generally break up.